Tokyo stocks drop as Takata plunges 20% on report of huge recall cost

The troubled firm collapsed 19.45 percent in late trading to 414 yen, its daily loss limit, after Bloomberg News said the company estimated its "worst case" scenario would involve the recall of 287.5 million airbag inflators at a cost of 2.7 trillion yen.AFP | March 30, 2016, 12:58 IST

TOKYO: Tokyo stocks fell Wednesday, with auto part supplier Takata plunging 20 percent after a report said its recall costs could soar as high as $24 billion as it struggles with a global airbag crisis.

The troubled firm collapsed 19.45 percent in late trading to 414 yen, its daily loss limit, after Bloomberg News said the company estimated its "worst case" scenario would involve the recall of 287.5 million airbag inflators at a cost of 2.7 trillion yen.

Takata and its automaker clients are still hashing out how the eye-watering costs would be shared, Bloomberg said, citing a person familiar with the matter.

Takata is struggling to deal with a global scandal that has seen some of its airbags deploy with explosive force, sending metal and plastic shrapnel hurtling toward drivers and passengers -- in some cases killing them or causing grisly injuries.

At least ten deaths have been linked to the ruptures, and more than 50 million Takata airbags have been recalled globally. The company has been accused of covering up the problem for years.

At the close, Tokyo's benchmark Nikkei 225 index was down 1.31 percent, or 224.57 points, to 16,878.96, while the broader Topix index of all first-section shares -- on which Takata is listed -- fell 1.55 percent, or 21.31 points, to 1,356.29.

Adding to selling pressure was a pick-up in the yen against the dollar after Federal Reserve chief Janet Yellen suggested US interest rates would remain unchanged into the second half of the year.

Yellen promised a cautious approach to future US interest rate hikes, saying the central bank has to pay heed to "broader concerns about global financial developments", including oil prices and the overall pace of growth.

Her comments threw cold water on hopes for an imminent rate hike.

In response, the dollar fell against the yen, which hits the profitability of Japan's exporters, knocking demand for their shares.

In Tokyo, the greenback fetched 112.33 yen compared with 112.78 yen in New York and 113.61 yen in Tokyo earlier Tuesday.